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Wednesday, February 07, 2007

Syndicate Bank to raise Rs 240 cr

Syndicate Bank entered the bond market on Tuesday to mobilise up to Rs 240 crore, reports Our Bureau. The public sector bank is raising the funds by issuing upper-tier bonds with a 15-year maturity. It will, however, have the right to call back the bonds after 10 years.

If Syndicate Bank manages to raise Rs 240 crore, it will exhaust its headroom to raise tier-2 bonds this fiscal. The bank is, however, eligible to raise upto Rs 150 crore through hybrid perpetual bonds, which qualify for tier-1 capital.The bank’s Rs 240 crore issue, however, includes a Rs 140-crore greenshoe option.

The bank has fixed the coupon at 9.3% for the first 10-year period. After the 10-year period, if the bank decides against exercising the call option, it will step up the coupon by another 50 basis points (bps).

The bond issue proceeds would help Syndicate Bank fund its business growth and augment long-term resources. “After the exercise, our capital adequacy ratio, which is at 11.34%, will be increased by 20-30 bps,” bank's general manager DC Pai. The issue is being managed by AK Capital Services, Citibank, Darashaw, HSBC, IDFC, Standard Chartered Bank and UTI Bank.

Syndicate Bank, with government holding of 66.5%, will also have the option of going public with a follow-on offer next year. It can offload government stake by another 14.5%. In case of public sector banks, government holding cannot go below 51%